Special Economic Zones Bill [B3-2013]: deliberations

10 June 2013

Chairperson: Ms J Fubbs (ANC)

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Meeting Summary

Following on from the previous meeting with the Committee, the Department responded to matters raised about the appointment of standing alternates to the Advisory Board, the Department’s position on a province as an applicant, clarity on roles and responsibilities of the different structures, clarity on the one stop shop and transitional arrangements for the Industrial Development Zones (IDZs).

The parliamentary legal advisor said that a number of amendments had been proposed for the Bill and it did not have a finalised list of proposed amendments yet, but a tracking document had been developed with the Department indicating draft changes, corrections and renumbering in it. The advisor and the Department then took the Committee through the proposed corrections and additions to the Bill to date.

Members asked what international best practice was for a one stop shop and what level of accountability was there if deadlines were not met. Members asked who appointed the commercial body and whether the applicant had to pay the costs if a commercial body was involved. Members said a single form containing all required information would be the best option for the one stop shop.

Meeting report

Department's response to Committee's queries on Special Economic Zones Bill
Mr Kaya Ngqaka, dti Chief Director: Infrastructure Investment Support Unit, responded to matters raised by the Committee at previous meetings on the Special Economic Zones Bill:

SEZ Advisory Board,
He said that the dti agreed with the proposed amendment of the term ‘Board’ to ‘Advisory Board’ for use throughout the Bill. It also agreed that the Bill be amended to enable the Minister to appoint standing, alternate members to the Board.

A province as an applicant
On the suggestion that provinces be treated differently in the application process, the dti felt that there was no basis to treat provinces differently and that SEZs were best regulated at a national level. This would not impinge on the legislative competence of the province to regulate trade. He added that section 146 of the Constitution applied in the event of conflict between national and provincial legislation in the context of trade.

He said that while the Bill did not provide support for measures for provinces and municipalities, it did not preclude them from developing incentives for SEZs.

Roles and relationships
He said the applicant or licensee could be a national, provincial or municipal department or a Private Public Partnership (PPP). The licensee then had to establish a SEZ entity and a SEZ Board. The SEZ Board would govern the entity and would approve the businesses operating in the zone. The SEZ Board would also appoint an operator in a transparent, competitive process. The operator would need to get an operator permit from the Minister.

One stop shop
He said the Bill obliged the operator to establish a one stop shop function for applicant businesses seeking to locate to the zone. The model could not be prescribed as it needed to be flexible and dynamic, but the Bill would provide for implementation protocols amongst government departments to facilitate the one stop shop processes. The Minister would report annually to Parliament on the one stop shop’s implementation. Various models had been studied and the dti was proposing that in the short term, SEZ and Government department account managers be appointed to act as the initial point of contact. The managers had to be senior managers with the authority to approve. A flowchart of the process was included (see p16 of presentation). In the medium to long term an online electronic facility would be used for the completion of applications.

Transitional arrangements
He said the Bill provided for IDZs and IDZ operator permits to be recognised in terms of the SEZ Bill. The Bill gave existing IDZs three years in which to comply with SEZ regulations.

Discussion
Mr W James (DA) asked what international best practice was for a one stop shop and asked what level of accountability there was if deadlines were not met.

Mr N Gcwabaza (ANC) asked who appointed the commercial body and whether the applicant had to pay the costs if a commercial body was involved.

Ms S van der Merwe (ANC) said a single form containing all required information would be the best option for the one stop shop.

Mr Ngqaka replied that the Department had looked at Mauritius, Egypt, Kenya, Malaysia and Indonesia, Indonesia for best practice. It had found that charges had been made to models based on the factors affecting a country at the time. It had looked at models from the perspective of what could work currently. He used the Department of Home Affairs and other departments as an example where managing accountability had worked when implementation protocols had been entered into to ensure service delivery. Accountability was also vested in the report which would be presented to Parliament by the Minister on the implementation of the protocols. The Department had worked with the parliamentary legal advisor on time frames in which applications had to be processed by government departments.

Working draft of Bill - current proposed amendments
Adv Charmaine van der Merwe, the parliamentary legal advisor, said that a number of amendments had been proposed to the Bill. It did not have a finalised list yet but did have a tracking document which had been developed with the Department. Due to the addition and deletion of clauses, the numbering in this document would be different. She then went through the current proposed changes:

▪ Under the heading ‘Bill” (line 4), ‘empower the Minister to establish’ would be replaced with ‘provide for the establishment of’.

▪ All instances of the term ‘the Board’ would be replaced by ‘the Advisory Board’. All instances of the term ‘licensee’ would be replaced by the term ‘Special Economic Zone Board.

▪ Under definitions, company would be ‘as defined under section 1 of the Companies Act of 2008’.

▪ The definitions for ‘free port ‘ - a duty free area for value adding activities for subsequent trans-shipment and for ‘ free trade zone’ – offering storage and distribution facilities for value adding activities for subsequent trans-shipment or re-export would be moved from their original positions to be placed under definitions.

▪ The definition of ‘person’ was deleted.

▪ There would be changes to the definition of ‘port of entry’ as recommended in the public hearings.

▪ ‘prescribed’ would mean ‘prescribed by regulation made in terms of this Act’.

▪ ‘public entity’ meant a public entity ‘as defined in section 1 of the Public Finance Management Act’.

▪ ‘this Act’ included ‘any regulation made in terms of this Act’.

▪ ‘sector development zone’ meant a zone focussed on the development of a specific sector or industry through the facilitation of general or specific industrial infrastructure, incentives, technical and business services primarily for the export market.

▪ In Chapter 2, under the purpose of a SEZ the word national was inserted so that it read ‘...so as to promote national economic growth…’

▪ Clause 7(d) and 7(h) would be deleted and 7(k) would see ‘three independent persons’ changed to ‘five independent persons’.

▪ In Clause 7(6), ‘or where appropriate Deputy Director-General’ would be added after the words Director General.

▪ In Clause 7(7) the Minister must appoint an alternate member for each of the members of government entities and that such members not be below Deputy Director General or an equivalent position.

▪ Adv van der Merwe said that she was recommending that a sub clause be inserted which would concern the establishment of an interim Advisory Board upon the dissolution of the Advisory Board.

▪ A new clause, clause 22, was added to cover the implementation protocol. The Minister may enter protocols with the Ministers of Environmental Affairs, Home Affairs, Labour, and Finance to improve coordination of government services or to promote the one stop shop. The Minister would table a report in Parliament annually on the implementation of the one stop shop and the protocols.

▪ The new clause 22(1) spoke of the Minister entering into agreements with organs of state whereas in reality the Minister was entering into agreements with other Ministers. The parliamentary law adviser would come back to the Committee on this issue.

▪ Clause 22(3) spoke of tabling the Minister's report before Parliament. It should be tabled in the National Assembly.

Mr B Radebe (ANC) pointed out that it was a section 76 Bill and covered both the National Assembly and the NCOP.

Adv van der Merwe replied that even though the Bill was classified as a section 76 Bill, because it dealt with regional development, the protocols were dealt with in the National Assembly.

▪ Under the chapter Designation of SEZs, clause 23(2) would see the insertion of the word ‘national’ in front of ‘government’s.’

▪ In clause 23(3)(c) the word ‘and ‘ was substituted with the word ‘or’ .

▪ Adv van der Merwe expressed concern that in clause 24(4) ‘in consultation’ meant the Minister (of Finance) had to agree, whereas the phrase ‘after consultation’ meant after consideration of the views of the Minister of Finance.

▪ She said that the Committee should possibly look at including a clause on pre-incorporation contracts, which would give the licensee the authority to act before the entity was established and thus reduce the time frame for a business to become operational.

▪ She said that in clause 28(1)(a) the word ‘its’ be replaced with ‘Special Economic Zone entity’.

Mr Monwabisi Nguqu, State Law Advisor, said that reference should be made that the entity acts through the SEZ Board.

▪ Adv van der Merwe, in discussing clause 29, said that currently only the Advisory Board needed to be consulted when the administration of the zone was taken over and that the SEZ Board and the entity needed to be consulted.

▪ In clause 29(2), an administrator was appointed; the administrator had to have the power to terminate the contract if it was detrimental to the licensee.

▪ In clause 29(3), where the Minister acted unilaterally in cases of emergency, Adv van der Merwe recommended that some consultation take place afterwards with the relevant bodies.

Mr Ngqaka said that under the heading ‘Suspension or withdrawal of designation’, the words ‘suspension or‘ would be removed.

▪ Adv van der Merwe said she was uneasy with the word ‘representation’ in clause 30(2)(b) which suggests that the Minister must consult.

▪ With regards to clause 33(1)(c), she suggested that the requirement that the operator needed to have sufficient capital be changed to read that: the operator should have access to sufficient capital.

Mr Radebe felt it would be reasonable to include this in the clause.

▪ Adv van der Merwe said that a suggestion from the public hearings was that there should be broader consultation if an operator’s permit was suspended or withdrawn. With reference to clause 36, it would be appropriate that the entity, the SEZ Board and the Licensee be consulted as they would be affected. Similarly, with clause 37, the SEZ Board or entity should be consulted and approve the transfer.